11th Circuit – Prepetition bad faith is grounds for Chapter 7 Dismissal

The 11th Circuit Court of Appeals held last week in a case of first impression that, “based on the ordinary meaning of the statutory language and relevant principles of statutory construction, the power to dismiss ‘for cause’ in § 707(a) includes the power to involuntarily dismiss a Chapter 7 case based on prepetition bad faith.” At issue was the Chapter 11 filing by a debtor who filed in order to, the Bankruptcy Court found, avoid a single large debt the Debtor “deliberate[ly] and persistent[ly] evaded “ over a 2-year period while paying insiders.

In so holding, the 11th Circuit joins one side of what the Court acknowledged to be a split of decisions among the federal circuits. The case, Craig Piazza v. Nueterra Healthcare Physical Therapy, LLC, arising from the Florida In re Craig Piazza bankruptcy case, can be viewed here.